Authors: K.P. Sapna Isotupa
Addresses: School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario N2L 3C5, Canada
Abstract: In this paper, we study a lost-sales (s, Q) inventory system with two classes of customers – high priority and low priority. We compare two policies for supplying the two types of customers with their requirements. In one policy, both customers are treated alike. In the other policy, when inventory levels are below a threshold level, only the demands from high-priority (HP) customers are met, whereas the low-priority (LP) customers are sent away unsatisfied. Under certain conditions, we note the remarkable fact that for a lost-sales (s, Q) inventory system with two classes of customers, differentiating between customers and hoarding items for the HP customer yield lower costs for the supplier and better service levels for both types of customers.
Keywords: Markov processes; stochastic processes; lost-sales inventory; multiple classes; rationing; cost comparison; high priority customers; low priority customers.
International Journal of Operational Research, 2011 Vol.12 No.1, pp.1 - 19
Available online: 08 Aug 2011 *Full-text access for editors Access for subscribers Purchase this article Comment on this article